Rather than focus on where the hotel industry is in the current cycle, the CEOs who spoke during the “View from the C-Suite” panel at the Lodging Conference in Phoenix this week shared the tools and metrics they rely on to predict what lies ahead.
Whether the industry is in an up or down cycle, quality is always going to count, said Kirk Kinsell, president and CEO of Loews Hotels & Resorts. “In terms of where we’re focusing in the future, it’s a lot about pace and judging where we are in terms of how we need to either contract or expand,” he added.
Best Western Hotels & Resorts relies on several indicators, such as how properties are performing relative to their comp sets and the pace of revenue per available room, occupancy, and average daily rate growth, said President and CEO David Kong. Data forecasts point to a slight positive increase in RevPAR but a decline in occupancy, which Kong said sounds an alarm bell. “If you don’t have any growth in occupancy, how can you have pricing power, and then how can you have growth in RevPAR?”
Factors that G6 Hospitality keeps an eye on include the unemployment rate and the amount of disposable income in the economy. “Especially in the economy segment, so much of the business is leisure driven, that you’re always looking at what is the potential level of disposable income,” said President and CEO Jim Amorosia. “There are lots of different ways to spend that money, and one of them is travel.” In the case of expansion, G6 looks at ways to garner a significant return on investment. If a contraction is imminent, rather than compressing costs, it looks at ways to achieve a better ROI for the same amount of money, while still improving the delivery of the guest experience.
HHM President and CEO Naveen Kakarla said his company looks at consumer spending, business spending, unemployment, and GDP. While healthy consumer spending has made a material difference in how this year is shaping up, he said business spending has put a lot of stress on the business.
The panelists also shared their view on loyalty programs as a driver of business. Motel 6 purposely does not have a loyalty program, Amorosia said, because the cost doesn’t necessarily gain in relation to where the market sits. He believes the key to loyalty is recognizing every single guest that comes through the door, by showing appreciation and ensuring guests have a welcoming experience. “Those things can be done with very little cost involved.”
Kong agreed that superior customer care is important to form an emotional connection with guests and build loyalty, Kong said. “Having said that, the loyalty program is crucially important, especially when trying to fight OTAs.”
For HHM’s branded hotels, which account for about two-thirds of its portfolio, “there is no question loyalty programs are very powerful, and we benefit significantly,” Kakarla said. “They are excellent at knowing the customer and driving repeat stays.” For its independent lifestyle hotels, however, HHM has found a real responsiveness to a perks program, which achieves the same goal but on a more individualized basis. During every stay, guests receive a complimentary item, such as a cupcake or a luggage tag. “I don’t think loyalty is going anywhere, but I do think what is valued is changing,” Kakarla said.
Rather than using an expensive points-based system, Loews strives to treat every customer as a valued guest and looks for new ways to encourage return stays, Kinsell said. “It is about recognition and personalization.”
Kong added that Marriott’s and Hilton’s loyalty programs drive more than 50 percent of their total business, and Best Western is approaching 40 percent. “If we didn’t have a loyalty program, can we hold on to those customers? And how can we drive customers to all of our other locations without the loyalty program?” he asked. “The customer care becomes the price of entry, and the loyalty program becomes an extra bonus people get.”
